چکیده انگلیسی

In The Moral Consequences of Economic Growth, Benjamin Friedman argues that growth reduces the strength of interpersonal income comparisons, and thereby tends to increases the desire for pro-social legislation, a position he supports by drawing on the historical records of the US and several Western European countries. We test this hypothesis using a variable from the World Values Survey that measures an individual's taste for government responsibility, which we interpret as a measure of the demand for egalitarian social policy. Our results provide support for a modified version of Friedman's hypothesis. In particular, we find that the taste for government responsibility is positively related to the recent change in the growth rate and negatively related to the change in income inequality. We conclude by discussing the implications of these findings for attempts to further the egalitarian social goals.

مقدمه انگلیسی

In The Moral Consequences of Economic Growth, Benjamin Friedman (2005) weaves together economic, political, intellectual and social histories into a compelling narrative that illustrates the link between economic and social progress. According to Friedman, “Economic growth … more often than not fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness and dedication to democracy.” (p. 4) Friedman's remarkable book is a challenge both to the common belief that societies face a fundamental trade-off between doing well and doing good and to the consequentialist moral yardsticks of welfare economics, according to which the social good is associated with the unintended impact of self-interested behavior. In Friedman's account, growth produces broad social gains specifically because it alters the psychological balance between envy and altruism, leaving individuals more generous and more solicitous of the wellbeing of others. 1
Turning first to US history, Friedman finds that periods of economic progress are characterized by the passage of significant legislation aimed at reducing social, economic and political inequality. Thus, the era of rapid industrialization following the Civil War gave rise to the Civil Rights Act of 1875, the boom years of the early twentieth century saw the passage of the Seventeenth and Nineteenth Amendments, and the two decades of prosperity following World War II concluded with a raft of Great Society legislation.2 In contrast, periods of economic decline are characterized by social retrenchment, such as the reversal of minority voting rights that followed the Panic of 1893 and the reduction in popular support for affirmative action, welfare programs, and liberal immigration policies following the economic turbulence of the 1970s. Friedman observes much the same pattern in the social and economic evolution of Western European states. In England, the economic growth of the early decades of the twentieth century coincides with the “new Liberalism” with its overt concern for the poor and the passage of legislation intended to reduce political and economic inequalities, while in Germany the economic devastation of the interwar years ushered the Nazi Party into power.
Rather than positing a political mechanism at the heart of the relationship between economic and social progress, Friedman identifies a more fundamental link, rooted in the impact of economic progress on individual preferences. Friedman argues that in evaluating their material wellbeing, individuals evaluate their current income level relative to that of their neighbors as well as to their own past income.3 Moreover, according to Friedman (p. 92) these modes of comparison are substitutes: “By continually giving most people the sense of living better than they or their families have in the not very distant past, sustained economic growth reduces the intensity of their desire to live better than one another.”
As might be expected of a work of this depth and scope, Friedman's book has been the subject of significant attention. For example, Stiglitz (2005) cautions that Friedman's analysis should not be understood as a blanket endorsement of any growth promoting policy, while on the political right Wilkinson (2006, p. 201) has questioned what he sees as Friedman's “rather parochial American welfare-statist conception of political morality.” However, neither of these reviewers considers the more fundamental question regarding Friedman's hypothesis: Does the link between economic and social progress that Friedman claims to have identified actually exist?
In this regard, Friedman's book is subject to a number of concerns common to works of economic history. One such concern regards the potential for narrative arguments to give disproportionate weight to supportive evidence. For example, the experience of the US in the Great Depression seems to fit Friedman's hypothesis at best awkwardly, and the welfare reforms instituted in the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 follow the shocks of the 1970s with a significant lag. A second concern regards the generality of Friedman's claim. While he turns his attention to the developing world in the fourth section of the book, the bulk of Friedman evidence is drawn from the US and Western Europe. Friedman's reliance on the experience of Western industrial countries raises the question of whether the relationships he identifies might be specific to societies at a particular stage of development or, perhaps, to those that share Western cultural or political institutions. We address these concerns by providing empirical evidence regarding the moral consequences of economic growth in a broad sample of countries.
Any empirical evaluation of Friedman's hypothesis faces a significant challenge in deciding on how to measure the dependent variable. An attempt to develop an internationally comparable measure of egalitarian of social policy would face numerous and probably insurmountable measurement issues. Because of this, we focus on the relationship between economic growth and the taste for egalitarian social policy, which we measure using survey data regarding attitudes toward government responsibility from the World Values Survey. Thus, our analysis focuses on how growth affects the desire for an egalitarian society, which Friedman identifies as the first link in the causal chain between growth and social progress, and not on the ability to realize it. Focusing on this relationship also allows us to set aside significant issues regarding the manner in which different political systems aggregate policy preferences.
Our analysis reveals strong support for a modified version of Friedman's hypothesis. While the relationship between the rate economic growth and the taste for government responsibility is not significant, we find support for a positive and robust relationship between the taste for government responsibility and the change in the growth rate. Thus, the demand for egalitarian social policy appears to be high not when the growth rate is high but when it is rising. A similar result applies to income inequality: the demand for egalitarian social policy is low not when inequality is high in an absolute sense, but when it is high relative to its long run average. Moreover, our estimates suggest that both of these effects are economically large. Using our baseline model, a one-standard deviation increase of the growth rate over its five year average corresponds to a 0.20 standard deviation rise in the taste for government responsibility. Similarly, a one standard deviation increase in the Gini coefficient over its long run average corresponds to a .24 standard deviation fall in the taste for government responsibility.
In addition, our findings do not support concerns that the Friedman hypothesis, in its modified form, is specific to developed countries or to countries with Western cultural roots. In particular, the effects of changes in growth and inequality are robust to the inclusion of controls for a country's regional location and the religious composition of its population. Indeed, our results suggest that changes in the growth rate matter more for policy preferences in developing countries, while changes in inequality matter more in developed countries. As discussed further below, these findings are broadly consonant with the understanding of preference formation that underlies the Easterlin paradox and, if anything, suggest that the modified Friedman hypothesis may apply more to developing than developed countries.
The remainder of this paper is structured as follows. Section 2 considers the relationship of Friedman's hypothesis to the existing literature. Section 3 describes the data set and empirical methodology. Section 4 presents our empirical results, and the final section discusses the implications of our findings.

نتیجه گیری انگلیسی

To the best of our knowledge, this is the first paper to test Friedman's claim that economic progress leads to social progress by increasing the demand for egalitarian social policy. Using data from the World Values Survey, we consider the relationship between economic growth and the taste for government responsibility in a panel of 84 countries. In addition to providing econometric evidence on the validity of Friedman's hypothesis, the use of a broad sample of countries allows us to consider the degree to which Friedman's hypothesis holds within a diverse set of countries from different regions and at different levels of development.
Our findings do not support Friedman's claims that the taste for government responsibility is increasing in the rate of growth and decreasing in the level of inequality. Instead, we find support for a modified version of Friedman's hypothesis in which an increase in the rate of growth is positively related to the taste for government responsibility. This result is robust to a variety of controls and sample restrictions. An important exception is that the relationship between the change in growth and the taste for government responsibility is not significant when the sample is restricted to the richer countries. More evidence is required to determine whether this result reflects the weakness of the data we employ or a systematic relationship between a country's level of development and the determinants of individual preferences. Moreover, the interpretation of our results requires some caution, as we cannot rule out existence of bias due to unobserved heterogeneity at the country-level, and we cannot claim to have identified causal effects.
Momentarily setting these caveats aside, it is worth considering the implications of our findings in the case that they do identify causal relationships. First, from a positive point of view, our results suggest that attempts to implement counter-cyclical macroeconomic policy may face significant resistance. For example, because recessions are characterized by a decline in economic growth, they will tend to be accompanied by a decrease in the taste for government responsibility and, thus, by a decrease in public support for counter-cyclical policies involving increased government spending. In contrast, the use of tax policy to stimulate aggregate demand may be more acceptable. This discussion suggests gains to the development of an institutionalized response to crises that by-passes legislative action.
Second, our results suggest that the literature on the political economy of inequality might usefully be expanded to consider the roles of growth and inequality in the formation of policy preferences. In particular, the relationship between changes in income inequality and the taste for government responsibility might generate a feedback loop with the potential to exacerbate the effect of inequality shocks. For example, an exogenous increase in income inequality would tend reduce public support for redistributive public policies, leading to policy changes that further increase the level of income inequality. Such a pattern of self-reinforcing changes in inequality levels and redistributive policies could support multiple policy-inequality equilibria, such as Benabou (2000) and Benabou and Tirole (2006) argue exist for the US and Western Europe.
Finally, from a normative point of view, the evidence presented here indicates a certain caution regarding the claim that economic progress can be expected to lead to social progress. While Friedman suggests that a permanent increase in the rate of economic growth would lead to an enduring increase in popular support for egalitarian social policy, our results indicate that the shift in public attitudes would characterized by a temporary rise, occurring directly following the rise to the higher rate of growth. Taken at face value, the evidence presented here indicates that to generate a sustained increase in support for egalitarian social policies, an accelerating growth rate would be necessary. Thus our analysis suggests that, in and of themselves, growth promoting policies may be a relatively blunt instruments for promoting social equality.